INCOME TAX ASSESSMENT ACT 1936 (ARCHIVE)

PART III - LIABILITY TO TAXATION  

Division 10AA - Prospecting and mining for petroleum  

SECTION 124ADG   DEDUCTION OF ALLOWABLE (POST 19 JULY 1982) CAPITAL EXPENDITURE  

124ADG(1)   [Expenditure from 19 July 1982 to end 1996/97 year]  

In this section, allowable (post 19 July 1982) capital expenditure , in relation to a taxpayer, means allowable capital expenditure incurred by the taxpayer after 19 July 1982 and before the 1997-98 year of income, not being expenditure incurred:

(a) under a contract entered into on or before 19 July 1982; or

(b) in respect of the construction of property by the taxpayer where that construction commenced on or before 19 July 1982.

Note:

Subdivision 330-C of the Income Tax Assessment Act 1997 gives a taxpayer a deduction for allowable capital expenditure incurred in the 1997-98 year of income or a later year of income.

124ADG(2)   [Deduction in respect of allowable capital expenditure]  

Where, in a year of income, a taxpayer incurs allowable (post 19 July 1982) capital expenditure, an amount ascertained in accordance with this section is an allowable deduction in respect of that expenditure in respect of that year of income and in respect of subsequent years of income.

124ADG(2A)   [No application of subsec (2) from 1997/98 year]  

A deduction is not allowable under subsection (2) for the 1997-98 year of income or any later year of income.

Note:

Section 330-5 of the Income Tax (Transitional Provisions) Act 1997 converts the amount of unrecouped expenditure at the end of the 1996-97 year of income into allowable capital expenditure incurred by a taxpayer in the 1997-98 year of income.

124ADG(3)   [Calculation of allowable deduction]  

Subject to subsection (6), the deduction allowable under subsection (2) in respect of a year of income (in this subsection referred to as the relevant year of income ) in respect of an amount of allowable (post 19 July 1982) capital expenditure incurred by a taxpayer is the amount ascertained by dividing the amount of that expenditure that is unrecouped as at the end of the relevant year of income by:

(a) a number equal to the difference between 10 and the number of years of income (if any) preceding the relevant year of income in respect of which a deduction has been allowed or is allowable, or, but for the operation of subsection (6), would have been allowed or would be allowable, under subsection (2) in respect of that amount of expenditure; or

(b) a number equal to the number of whole years in the estimated life of the petroleum field or proposed petroleum field as at the end of the relevant year of income,

whichever number is the less.

124ADG(4)   [Calculation of unrecouped capital expenditure]  

For the purposes of subsection (3), the amount of the allowable (post 19 July 1982) capital expenditure incurred by a taxpayer that is unrecouped as at the end of a year of income (in this subsection referred to as the relevant year of income ) shall be ascertained by deducting from the amount of that allowable (post 19 July 1982) capital expenditure the sum of:

(a) any part of that allowable (post 19 July 1982) capital expenditure that:

(i) has been allowed or is allowable, or, but for the operation of subsection (6), would have been allowed or would be allowable, as a deduction under subsection (2) in respect of a year of income preceding the relevant year of income; or

(ii) was incurred on property (not being property in respect of which a notice has been duly given to the Commissioner under section 124AB by the taxpayer and a person who acquired the property from the taxpayer):

(A) that has been disposed of, lost or destroyed; or

(B) the use of which by the taxpayer for the purposes of carrying on prescribed petroleum operations has been otherwise terminated,

and has not been allowed and is not allowable as a deduction under subsection (2) in respect of a year of income preceding the relevant year of income; and

(b) so much of any amounts specified in notices duly given to the Commissioner under section 124AB in relation to the acquisition from the taxpayer, during the relevant year of income or a year of income preceding the relevant year of income, of a petroleum prospecting or mining right or petroleum prospecting or mining information as:

(i) is attributable to that allowable (post 19 July 1982) capital expenditure; and

(ii) has not been allowed and is not allowable as a deduction under subsection (2) in respect of a year of income preceding the relevant year of income.

124ADG(5)   [Deemed allowable deductions]  

For the purposes of subparagraphs (4)(a)(ii) and (4)(b)(ii), an amount that would have been allowed or allowable as a deduction under subsection (2) but for the operation of subsection (6) shall be deemed to have been allowed or to be allowable as such a deduction.

124ADG(6)   [Maximum allowable deduction]  

The amount, or the total of the amounts, of the deduction or deductions allowable under subsection (2) in respect of a year of income (including any amount that is deemed to be a deduction so allowable by virtue of subsection (7)) shall not exceed an amount equal to so much of the assessable income of the year of income as remains after deducting all allowable deductions, other than deductions allowable under this section or under section 124AH , and, where the total of the amounts of 2 or more deductions that would be allowable under this section but for this subsection exceeds the maximum amount determined in accordance with this subsection, those deductions shall be reduced respectively by amounts proportionate to those deductions and equal in total to the excess.

124ADG(7)   [Excess deductions]  

Subject to subsections (8) and (9), where the whole or a part of a deduction in respect of a year of income is disallowed under subsection (6), that whole or part shall be deemed to be a deduction that is allowable under subsection (2) in respect of the next succeeding year of income.

Note:

Subsection (2A) limits deductions allowable under subsection (2) to years of income before the 1997-98 year of income. Section 330-45 of the Income Tax (Transitional Provisions) Act 1997 converts the whole or a part of a deduction disallowed in the 1996-97 year of income into an amount a taxpayer can deduct in the 1997-98 year of income.

124ADG(8)   [Disposal, loss, destruction or termination of use of property]  

Where:

(a) an amount of allowable (post 19 July 1982) capital expenditure was incurred by a taxpayer on property (not being property in respect of which a notice has been duly given to the Commissioner under section 124AB ) that, during a year of income, has been disposed of, lost or destroyed or the use of which by the taxpayer for the purposes of carrying on prescribed petroleum operations has been otherwise terminated; and

(b) the whole or a part of an amount (which whole or part is in this subsection referred to as the relevant amount ) in respect of which a deduction would, but for this subsection, be allowable to the taxpayer in that year of income or in a succeeding year of income by virtue of the operation of subsection (7) is attributable to the amount referred to in paragraph (a),

a deduction is not allowable to the taxpayer in respect of the relevant amount.

124ADG(9)   [Deductions re acquisition of petroleum prospecting right, etc]  

Where:

(a) an amount is specified in a notice duly given to the Commissioner under section 124AB in relation to the acquisition from a taxpayer, during a year of income, of a petroleum prospecting or mining right or petroleum prospecting or mining information; and

(b) the whole or a part of an amount (which whole or part is in this subsection referred to as the relevant amount ) in respect of which a deduction would, but for this subsection, be allowable to the taxpayer in that year of income or in a succeeding year of income by virtue of the operation of subsection (7) is attributable to the amount referred to in paragraph (a),

a deduction is not allowable to the taxpayer in respect of the relevant amount.

124ADG(10)   [Recommencement of use of property for prescribed petroleum operations]  

Where:

(a) after 17 August 1976:

(i) a taxpayer has incurred allowable capital expenditure on property the use of which by the taxpayer for the purposes of carrying on prescribed petroleum operations has been terminated; or

(ii) a taxpayer has, otherwise than in carrying on prescribed petroleum operations, incurred expenditure of a capital nature on property, being expenditure that would have been allowable capital expenditure if it had been incurred in carrying on such operations; and

(b) the property has, after 19 July 1982, come into use by the taxpayer for purposes for which allowable capital expenditure may be incurred,

so much of the expenditure referred to in subparagraph (a)(i) or (ii), as the case may be, as the Commissioner determines shall, for the purposes of this section, be deemed to have been incurred by the taxpayer on that property, on the day on which that property so came into use by the taxpayer, for the purposes for which that property so came into use.

124ADG(11)   [Commissioner's discretion re life of petroleum field]  

Where, having regard to the information in his possession, the Commissioner is not satisfied that the estimated life of a petroleum field or a proposed petroleum field as made by the taxpayer is a reasonable estimate, the estimated life shall, for the purposes of paragraph (3)(b), be taken to be such period as the Commissioner considers reasonable.